“Overall, we had a solid fourth quarter underscored by strong orders,
sales and cash flows in spite of the challenges and uncertainty in the
U.S. defense budget. Sales increased in our Electronic Systems and AM&M
segments, which demonstrates that L-3 is well-positioned and executing
our strategy to grow our international and commercial businesses and
expand market share,” said Michael T. Strianese, chairman, president and
chief executive officer. “For the year, orders grew 7% compared to last
year, resulting in a book-to-bill ratio of 1.05x. We ended the quarter
with funded backlog of $10.9 billion, up 10% compared to December 2011.”

“We continue to aggressively manage our costs to maintain a competitive
advantage in the markets we serve, while delivering affordable and
innovative solutions to our customers. We remain focused on shareholder
value and deploying our capital using a disciplined and balanced
approach that includes cash dividends and share repurchases, modest debt
reduction, investment in research and development and acquisitions.
Consistent with this strategy, we repurchased $368 million of our common
stock and paid dividends of $46 million during the quarter. For 2012, we
repurchased a total of $872 million of our shares and paid dividends of
$195 million, resulting in approximately $1.1 billion of cash returned
to our shareholders. In addition, our acquisitions of the Kollmorgen
Electro-Optical business (named L-3 KEO) and the commercial aircraft
simulation business of Thales Group (named Link U.K.), enhance our
market position and also expand our commercial opportunities.”

Key contract wins for the quarter included: (1) an indefinite-delivery,
indefinite-quantity (ID/IQ) contract to supply the second generation of
Advanced Imaging Technology (AIT) systems to the Transportation Security
Administration (TSA), (2) new business to provide contractor logistics
services for specialized pilot training for the U.S. Air Force, and (3)
a production contract for modems and SATCOM On-The-Move (SOTM) antennas
to be used on the U.S. Army’s Warfighter Information Network-Tactical
(WIN-T) program.

The 2011 fourth quarter and full year results were impacted by: (1)
a tax benefit of $78 million, or $0.77 per diluted share, and (2)
non-cash impairment charges of $57 million ($50 million after income
taxes, or $0.49 per diluted share), comprised of a goodwill
impairment charge of $43 million ($42 million after income taxes, or
$0.41 per diluted share), and a long-lived asset impairment charge
at an equity method investment of $14 million ($8 million after
income taxes, or $0.08 per diluted share). These items are
collectively referred to as the Q4 2011 Items.

The company believes that the Q4 2011 Items affect the comparability
of the results of operations of the 2012 fourth quarter and full
year to the results of operations for the 2011 fourth quarter and
full year. The company also believes that disclosing net income and
diluted EPS excluding the Q4 2011 Items will allow investors to more
easily compare the 2012 fourth quarter and full year results to the
2011 fourth quarter and full year results. Further, the goodwill
impairment charge is included in consolidated operating income, but
excluded from segment operating income because the charge is
excluded by management for purposes of assessing segment operating
performance.

nm

-

not meaningful

Fourth Quarter Results of Operations: For the 2012 fourth
quarter, consolidated net sales of $3.6 billion increased $17 million,
or 0.5%, compared to the 2011 fourth quarter. Sales growth from the
Electronic Systems and Aircraft Modernization and Maintenance (AM&M)
segments was partially offset by lower sales from the Command, Control,
Communications, Intelligence, Surveillance and Reconnaissance (C3ISR)
and National Security Solutions (NSS) segments. Acquired businesses(1),
which are all included in the Electronic Systems segment, added $66
million to net sales in the 2012 fourth quarter. Net sales to commercial
and foreign government end customers grew 23% to $897 million for the
2012 fourth quarter compared to $727 million for the 2011 fourth quarter.

___________________________________

(1)

Net sales from acquired businesses are comprised of (i) net sales
from business acquisitions that are included in L-3’s actual results
for less than 12 months, less (ii) net sales from business and
product line divestitures that are included in L-3’s actual results
for the 12 months prior to the divestitures.

Segment operating income for the 2012 fourth quarter decreased by $33
million, or 8%, compared to the 2011 fourth quarter. Segment operating
income as a percentage of sales (segment operating margin) decreased by
100 basis points to 10.2% for the 2012 fourth quarter compared to 11.2%
for the 2011 fourth quarter. Higher pension expense of $11 million ($7
million after income tax, or $0.07 per diluted share) reduced segment
operating margin by 30 basis points. The remaining decrease in segment
operating margin is primarily due to sales mix changes and 2011 fourth
quarter favorable contract performance adjustments that did not recur in
the 2012 fourth quarter in the Electronic Systems segment. See segment
results below for additional discussion of sales and operating margin.

Interest expense declined by $6 million due to lower interest rates on
outstanding fixed rate debt, partially offset by interest expense
allocated to discontinued operations for the 2011 fourth quarter.

Interest and other income increased by $12 million for the 2012 fourth
quarter compared to the same period last year due primarily to a 2011
fourth quarter impairment charge of $14 million for long-lived assets at
an equity method investment.

The effective tax rate for the 2012 fourth quarter increased to 31.7%
from 7.6% for the same period last year. Excluding the Q4 2011 Items,
the 2011 fourth quarter effective tax rate would have been 31.9%.

Net income from continuing operations attributable to L-3 in the 2012
fourth quarter decreased 16% to $212 million compared to the 2011 fourth
quarter, and diluted EPS from continuing operations decreased 10% to
$2.25 from $2.49. Excluding the Q4 2011 Items, net income from
continuing operations attributable to L-3 decreased 5% and diluted EPS
increased by 2%. Diluted weighted average common shares outstanding for
the 2012 fourth quarter declined by 7% compared to the 2011 fourth
quarter due to repurchases of L-3 common stock.

Full Year Results of Operations: For the year ended December 31,
2012 consolidated net sales decreased by $12 million, or 0.1%, compared
to the year ended December 31, 2011. Higher sales from the C3ISR,
Electronic Systems and AM&M segments were offset by lower sales from the
NSS segment. Acquired businesses, which are all included in the
Electronic Systems segment, added $196 million to net sales in the year
ended December 31, 2012. Net sales to commercial and foreign government
end customers grew 15% to $3,120 million for the year ended December 31,
2012 compared to $2,719 million for the year ended December 31, 2011.

Segment operating income for the year ended December 31, 2012 decreased
by $91 million, or 6%, compared to the year ended December 31, 2011.
Segment operating margin decreased by 70 basis points to 10.3% for the
year ended December 31, 2012 compared to 11.0% for the year ended
December 31, 2011. Higher pension expense of $38 million ($24 million
after income tax, or $0.25 per diluted share) reduced segment operating
margin by 30 basis points. The remaining decrease in segment operating
margin is primarily due to sales mix changes in the Electronic Systems
and C3ISR segments and $9 million of legal fees and inventory
write-downs related to security and safety equipment in the NSS segment.
See segment results below for additional discussion of sales and
operating margin.

Interest and other income increased by $8 million for the year ended
December 31, 2012, compared to the year ended December 31, 2011
primarily due to reasons similar to the 2012 fourth quarter.

The effective tax rate for the year ended December 31, 2012 increased to
32.2% from 25.5% for the year ended December 31, 2011. Excluding the Q4
2011 Items, the effective tax rate for the year ended December 31, 2011
would have been 31.2%. The increase in the effective tax rate is
primarily due to the expiration of the U.S. Federal research and
experimentation tax credit on December 31, 2011.

Net income from continuing operations attributable to L-3 in the year
ended December 31, 2012 decreased 9% to $782 million compared to the
year ended December 31, 2011, and diluted EPS from continuing operations
decreased to $8.01 from $8.08. Excluding the Q4 2011 Items, net income
from continuing operations attributable to L-3 decreased 5% and diluted
EPS increased 2%. Diluted weighted average common shares outstanding for
the year ended December 31, 2012 declined by 8% compared to the year
ended December 31, 2011 due to repurchases of L-3 common stock.

Orders: Funded orders for the 2012 fourth quarter increased 17%
to $3.3 billion compared to $2.9 billion for the 2011 fourth quarter.
Funded orders for the year ended December 31, 2012 increased 7% to $13.8
billion compared to $12.9 billion for the year ended December 31, 2011.
Funded backlog grew 10% to $10.9 billion at December 31, 2012, compared
to $9.9 billion at December 31, 2011.

Cash flow: Net cash from operating activities from continuing
operations was $1,231 million for each of the years ended December 31,
2012 and 2011. Capital expenditures, net of dispositions of property,
plant and equipment, were $205 million for the year ended December 31,
2012, compared to $181 million for the year ended December 31, 2011.

Cash returned to shareholders: The table below summarizes the
cash returned to shareholders during the year ended December 31, 2012,
compared to the year ended December 31, 2011.

Year Ended Dec. 31,

($ in millions)

2012

2011

Net cash from operating activities from continuing operations

$

1,231

$

1,231

Less: Capital expenditures, net of dispositions

(205

)

(181

)

Plus: Income tax payments attributable to discontinued operations

24

63

Free cash flow(1)

$

1,050

$

1,113

Dividends paid

$

195

$

188

Common stock repurchases

872

958

Cash returned to shareholders

$

1,067

$

1,146

Percent of free cash flow returned to shareholders

102

%

103

%

___________________

(1)

Free cash flow is defined as net cash from operating activities less
net capital expenditures (capital expenditures less cash proceeds
from dispositions of property, plant and equipment) plus income tax
payments attributable to discontinued operations. Free cash flow
represents cash generated after paying for interest on borrowings,
income taxes, pension benefit contributions, capital expenditures
and changes in working capital, but before repaying principal amount
of outstanding debt, paying cash dividends on common stock,
repurchasing shares of our common stock, investing cash to acquire
businesses, and making other strategic investments. Thus, a key
assumption underlying free cash flow is that the company will be
able to refinance its existing debt. Because of this assumption,
free cash flow is not a measure that should be relied upon to
represent the residual cash flow available for discretionary
expenditures.

Reportable SegmentResults

Electronic Systems

Fourth Quarter Ended

Year Ended Dec. 31,

($ in millions)

2012

2011

Increase/(decrease)

2012

2011

Increase/(decrease)

Net sales

$

1,616.7

$

1,555.1

4

%

$

5,676.8

$

5,627.9

1

%

Operating income

$

192.1

$

215.1

(11

)%

$

672.5

$

718.9

(6

)%

Operating margin

11.9

%

13.8

%

(190) bpts

11.8

%

12.8

%

(100) bpts

Fourth Quarter: Electronic Systems net sales for the 2012 fourth
quarter increased by $62 million, or 4%, compared to the 2011 fourth
quarter. Sales increased: (1) $66 million for Simulation & Training of
which $25 million was from the Link U.K. acquisition and $41 million was
primarily due to increased deliveries of U.S. Army rotary wing training
systems for the Flight School XXI program, (2) $17 million for Precision
Engagement primarily due to increased deliveries of ordnance products,
(3) $15 million for Marine Services primarily due to the landing craft
air cushion vehicle service life extension program, (4) $13 million for
Microwave Products primarily due to increased deliveries of mobile and
ground-based satellite communication systems for the U.S. military, and
(5) $4 million for Sensor Systems ($35 million from the L-3 KEO
acquisition partially offset by a decline of $31 million due to lower
volume for airborne EO/IR turrets for the U.S. Department of Defense
(DoD)). These increases were partially offset by sales decreases of: (1)
$39 million for Power & Control Systems due to lower demand for
commercial shipbuilding products, which reduced sales by $19 million
including $5 million of negative foreign currency translation, and lower
shipments of tactical quiet generators for the U.S. Army, which reduced
sales by $20 million, and (2) $14 million for Warrior Systems due to
reduced U.S. Army requirements for night vision and illumination
products.

Electronic Systems operating income for the 2012 fourth quarter
decreased by $23 million, or 11%, compared to the 2011 fourth quarter.
Operating margin decreased by 190 basis points to 11.9%. Operating
margin declined by 120 basis points primarily due to lower sales at
Power & Control Systems and sales mix changes at Sensor Systems and 60
basis points due to more favorable contract performance adjustments
during the 2011 fourth quarter as compared to the 2012 fourth quarter.
Higher pension expense of approximately $1 million reduced operating
margin by 10 basis points.

Full Year: Electronic Systems net sales for the year ended
December 31, 2012 increased by $49 million, or 1%, compared to the year
ended December 31, 2011. Sales increased: (1) $149 million for Sensor
Systems primarily for the L-3 KEO acquisition, (2) $85 million for
Microwave Products primarily due to increased deliveries of mobile and
ground-based satellite communication systems for the U.S. military and
power devices for commercial satellite communication systems, (3) $72
million for Simulation & Training of which $49 million was from the Link
U.K. acquisition and $23 million was primarily due to increased
deliveries of U.S. Army rotary wing training systems for the Flight
School XXI program, and (4) $30 million for Marine Services due to
reasons similar to the 2012 fourth quarter. These increases were
partially offset by sales declines of: (1) $157 million for Power &
Control Systems due to reduced shipments of tactical quiet generators
for the U.S. Army, which reduced sales by $92 million, and by $65
million due to negative foreign currency translation of $41 million and
lower demand for commercial shipbuilding, (2) $82 million for Warrior
Systems due to reduced U.S Army requirements for night vision and
illumination products, and (3) $48 million for Precision Engagement due
to lower volume from completed contracts.

Electronic Systems operating income for the year ended December 31, 2012
decreased by $46 million, or 6%, compared to the year ended December 31,
2011. Operating margin decreased by 100 basis points to 11.8%. Operating
margin declined by 90 basis points primarily due to lower sales for
Power & Control Systems and higher pension expense of $5 million, which
reduced operating margin by 10 basis points.

C3ISR

Fourth Quarter Ended

Year Ended Dec. 31,

($ in millions)

2012

2011

Decrease

2012

2011

Increase/(decrease)

Net sales

$

967.1

$

1,013.2

(5)%

$

3,601.2

$

3,479.9

3

%

Operating income

$

91.9

$

109.7

(16)%

$

363.7

$

394.4

(8

)%

Operating margin

9.5

%

10.8

%

(130) bpts

10.1

%

11.3

%

(120) bpts

Fourth Quarter: C3ISR net sales for the 2012 fourth
quarter decreased by $46 million, or 5%, compared to the 2011 fourth
quarter. Sales declined by $52 million for networked communication
systems and by $21 million for logistics support and fleet management
services. The decline for networked communication systems was primarily
due to: (1) lower volume for manned and unmanned platforms for DoD
customers as contracts near completion and for the Hawklink contract as
development and low rate initial production work near completion, and
(2) fewer deliveries of remote video terminals to the U.S. Army. The
sales decline for logistics support and fleet management services was
due to lower demand for ISR aircraft supporting U.S. military operations
in Iraq and Afghanistan. These decreases were partially offset by $27
million of higher sales for ISR Systems due to increased demand for
airborne ISR systems for U.S. government and foreign military customers.

Full Year: C3ISR net sales for the year ended December
31, 2012 increased by $121 million, or 3%, compared to the year ended
December 31, 2011. The increase in sales was primarily due to higher
demand for airborne ISR systems for U.S. government and foreign military
customers.

C3ISR operating income for the year ended December 31, 2012
decreased by $31 million, or 8%, compared to the year ended December 31,
2011. Operating margin decreased by 120 basis points to 10.1%. Higher
pension expense of $24 million reduced operating margin by 70 basis
points and sales mix changes reduced operating margin by 50 basis points.

AM&M

Fourth Quarter Ended

Year Ended Dec. 31,

($ in millions)

2012

2011

Increase

2012

2011

Increase

Net sales

$

628.8

$

614.1

2

%

$

2,483.3

$

2,439.5

2

%

Operating income

$

57.4

$

47.6

21

%

$

236.2

$

228.1

4

%

Operating margin

9.1

%

7.8

%

130 bpts

9.5

%

9.4

%

10 bpts

Fourth Quarter: AM&M net sales for the 2012 fourth quarter
increased by $15 million, or 2%, compared to the 2011 fourth quarter.
Platform systems sales increased by $52 million, which was partially
offset by a sales decline of $37 million for logistics support services.
The platform systems sales increase was due primarily to volume on new
contracts, including international head-of-state aircraft modification
contracts and the Australia C-27J, and increased scope on the EC-130
aircraft for the U.S. Air Force (USAF). The logistics support services
decrease was due primarily to the competitive loss of a task order for
U.S. Army contract field team support services in Southwest Asia,
partially offset by increased volume for field maintenance and
sustainment services for U.S. Army C-12 aircraft, training aircraft for
the USAF and U.S. government agency aircraft.

AM&M operating income for the 2012 fourth quarter increased by $10
million, or 21%, compared to the 2011 fourth quarter. Operating margin
increased 130 basis points to 9.1%. Operating margin increased by 190
basis points due to a $12 million charge in the 2011 fourth quarter for
the reduction in the USAF Joint Cargo Aircraft (JCA) aircraft order
quantity. This increase was partially offset by higher pension expense
of $4 million, which reduced operating margin by 60 basis points.

Full Year: AM&M net sales for the year ended December 31, 2012
increased by $44 million, or 2%, compared to the year ended December 31,
2011. Platform systems sales increased by $130 million, which was
partially offset by a sales decline of $86 million for logistic support
services. The platform systems increase was due primarily to volume on
new contracts, including the Australia C-27J and international
head-of-state aircraft modification contracts and increased scope on the
EC-130 aircraft for the USAF. These increases were partially offset by
lower JCA volume for the USAF. Logistics support services decreased due
primarily to the loss of a task order for U.S. Army contract field team
support services in Southwest Asia, partially offset by increased demand
for field maintenance and sustainment services on a U.S. Army rotary
wing aircraft contract that was competitively won in September 2011, and
for U.S. Army C-12 aircraft.

AM&M operating income for the year ended December 31, 2012 increased by
$8 million, or 4%, compared to the year ended December 31, 2011.
Operating margin increased by 10 basis points to 9.5%. Unfavorable
contract performance in 2011 primarily for JCA increased operating
margin by 110 basis points. This increase was partially offset by sales
mix changes, which reduced operating margin by 60 basis points, and an
increase in pension expense of $9 million, which reduced operating
margin by 40 basis points.

NSS

Fourth Quarter Ended

Year Ended Dec. 31,

($ in millions)

2012

2011

Decrease

2012

2011

Decrease

Net sales

$

347.5

$

360.2

(4

)%

$

1,385.0

$

1,610.3

(14

)%

Operating income

$

22.9

$

24.5

(7

)%

$

79.0

$

100.4

(21

)%

Operating margin

6.6

%

6.8

%

(20) bpts

5.7

%

6.2

%

(50) bpts

Fourth Quarter: NSS net sales for the 2012 fourth quarter
decreased by $13 million, or 4%, compared to the 2011 fourth quarter due
to a $10 million decline in information technology (IT) support services
for select non-DoD U.S. Government agencies as a result of contract
losses in 2011 and 2012, and a $3 million decline for intelligence
support services due to the drawdown of U.S. military forces in Iraq.

NSS operating income for the 2012 fourth quarter decreased by $2
million, or 7%, compared to the 2011 fourth quarter. Operating margin
decreased by 20 basis points to 6.6%, primarily due to legal fees of $2
million related to a supplier dispute, which reduced operating margin by
60 basis points. This decrease was partially offset by reduced overhead
costs, which increased operating margin by 40 basis points.

Full Year: NSS net sales for the year ended December 31, 2012
decreased by $225 million, or 14%, compared to the year ended December
31, 2011. Less demand for U.S. Special Operations Command IT support
services, due to our previous single-award contract converting to
several multiple-award contracts which reduced our work share, lowered
sales by $82 million. A decline in IT support services for select
non-DoD U.S. Government agencies lowered sales by $93 million comprised
of: (1) $38 million due to customer IT spending reductions, and (2) $55
million due to contract losses in 2011 and 2012. Sales also declined by
$50 million for intelligence support services due to the drawdown of
U.S. military forces in Iraq.

NSS operating income for the year ended December 31, 2012 decreased by
$21 million, or 21%, compared to the year ended December 31, 2011.
Operating margin decreased by 50 basis points to 5.7%. The decrease in
operating margin was due primarily to legal fees of $5 million related
to a supplier dispute, which reduced operating margin by 40 basis
points, and a $4 million inventory write-down for security and safety
equipment, which reduced operating margin by 30 basis points. These
decreases were partially offset by reduced overhead costs, which
increased operating margin by 20 basis points.

FinancialGuidance

Based on information known as of today, the company has updated its
consolidated and segment financial guidance for the year ending December
31, 2013, previously provided on December 4, 2012, as presented in the
tables below. All financial guidance amounts are estimates subject to
change in the future, including as a result of matters discussed under
the “Forward-Looking Statements” cautionary language beginning on page
8, and the company undertakes no duty to update its guidance.

The 2013 guidance assumes that the Sequestration spending reductions
to the fiscal year 2013 (FY13) DoD budget, mandated by the Budget
Control Act of 2011 and scheduled to take effect on March 1, 2013,
do not occur. The 2013 guidance also assumes the FY13 DoD Continuing
Resolution Authority that expires on March 27, 2013 will not be
extended.

The change to our consolidated financial guidance is due to the
enactment of the American Taxpayer Relief Act of 2012 on January 2,
2013, which retroactively reinstated and extended the U.S. Federal
research and experimentation tax credit (R&E Credit) for all of 2012 and
2013. As a result, the company expects to recognize a tax benefit of $18
million, or $0.20 per diluted share, reducing its 2013 expected
effective tax rate by 170 basis points. The company expects to record
$10 million, or $0.11 per diluted share, of the R&E Credit tax benefit
during the first quarter of 2013 for the portion of the R&E Credit
related to the 2012 tax year.

Segment 2013 Financial Guidance

($ in millions)

Current(1)

Net Sales:

Electronic Systems

$5,425 to $5,525

C3ISR

$3,500 to $3,600

AM&M

$2,325 to $2,425

National Security Solutions

$1,200 to $1,300

Operating Margins:

Electronic Systems

10.7% to 10.9%

C3ISR

10.4% to 10.6%

AM&M

9.1% to 9.3%

National Security Solutions

6.4% to 6.6%

_________________

(1)

The current segment 2013 financial guidance has not changed from the
previous guidance provided on

December 4, 2012.

Additional financial information regarding the 2012 fourth quarter
results and the 2013 updated financial guidance is available on the
company’s website at www.L-3com.com.

Conference Call

In conjunction with this release, L-3 will host a conference call today,
Wednesday, January 30, 2013 at 9:30 a.m. ET that will be simultaneously
broadcast over the Internet. Michael T. Strianese, chairman, president
and chief executive officer, and Ralph G. D’Ambrosio, senior vice
president and chief financial officer, will host the call.

9:30 a.m. ET

8:30 a.m. CT

7:30 a.m. MT

6:30 a.m. PT

Listeners may access the conference call live over the Internet at the
company’s website at:

Please allow fifteen minutes prior to the call to visit our website to
download and install any necessary audio software. The archived version
of the call may be accessed at our website or by dialing (888) 286-8010
(passcode: 15485672), beginning approximately two hours after the call
ends and will be available until the company’s next quarterly earnings
release.

Headquartered in New York City, L-3 employs approximately 51,000 people
worldwide and is a prime contractor in C3ISR (Command,
Control, Communications, Intelligence, Surveillance and Reconnaissance)
systems, aircraft modernization and maintenance, and national security
solutions. L-3 is also a leading provider of a broad range of electronic
systems used on military and commercial platforms.

To learn more about L-3, please visit the company’s website at www.L-3com.com.
L-3 uses its website as a channel of distribution of material company
information. Financial and other material information regarding L-3 is
routinely posted on the company’s website and is readily accessible.

Forward-Looking Statements

Certain of the matters discussed in this release, including information
regarding the company’s 2012 financial outlook that are predictive in
nature, that depend upon or refer to events or conditions or that
include words such as ‘‘expects,’’ ‘‘anticipates,’’ ‘‘intends,’’
‘‘plans,’’ ‘‘believes,’’ ‘‘estimates,’’ and similar expressions
constitute forward-looking statements. Although we believe that these
statements are based upon reasonable assumptions, including projections
of total sales growth, sales growth from business acquisitions, organic
sales growth, consolidated operating margins, total segment operating
margins, interest expense, earnings, cash flow, research and development
costs, working capital, capital expenditures and other projections, they
are subject to several risks and uncertainties, and therefore, we can
give no assurance that these statements will be achieved. Such
statements will also be influenced by factors which include, among other
things: our dependence on the defense industry and the business risks
peculiar to that industry, including changing priorities or reductions
in the U.S. Government defense budget; backlog processing and program
slips resulting from delayed funding of the Department of Defense (DoD)
budget; our reliance on contracts with a limited number of agencies of,
or contractors to, the U.S. Government and the possibility of
termination of government contracts by unilateral government action or
for failure to perform; the extensive legal and regulatory requirements
surrounding our contracts with the U.S. or foreign governments and the
results of any investigation of our contracts undertaken by the U.S. or
foreign governments; our ability to retain our existing business and
related contracts (revenue arrangements); our ability to successfully
compete for and win new business and related contracts (revenue
arrangements) and to win re-competitions of our existing contracts; our
ability to identify and acquire additional businesses in the future with
terms that are attractive to L-3 and to integrate acquired business
operations; the impact of any strategic initiatives undertaken by us,
and our ability to achieve anticipated benefits; our ability to maintain
and improve our consolidated operating margin and total segment
operating margin in future periods; our ability to obtain future
government contracts (revenue arrangements) on a timely basis; the
availability of government funding or cost-cutting initiatives and
changes in customer requirements for our products and services; our
significant amount of debt and the restrictions contained in our debt
agreements; our ability to continue to retain and train our existing
employees and to recruit and hire new qualified and skilled employees as
well as our ability to retain and hire employees with U.S. Government
security clearances; actual future interest rates, volatility and other
assumptions used in the determination of pension benefits and equity
based compensation, as well as the market performance of benefit plan
assets; our collective bargaining agreements, our ability to
successfully negotiate contracts with labor unions and our ability to
favorably resolve labor disputes should they arise; the business,
economic and political conditions in the markets in which we operate,
including those for the commercial aviation, shipbuilding and
communications markets; global economic uncertainty; the DoD’s
contractor support services in-sourcing and efficiency initiatives;
events beyond our control such as acts of terrorism; our ability to
perform contracts (revenue arrangements) on schedule; our international
operations; our extensive use of fixed-price type contracts as compared
to cost-plus type and time-and-material type contracts; the rapid change
of technology and high level of competition in the defense industry and
the commercial industries in which our businesses participate; our
introduction of new products into commercial markets or our investments
in civil and commercial products or companies; the outcome of litigation
matters, including in connection with jury trials; results of audits by
U.S. Government agencies; results of on-going governmental
investigations, including potential suspensions or debarments; the
impact on our business of improper conduct by our employees, agents or
business partners; anticipated cost savings from business acquisitions
not fully realized or realized within the expected time frame; the
outcome of matters relating to the Foreign Corrupt Practices Act (FCPA)
and similar non-U.S. regulations; ultimate resolution of contingent
matters, claims and investigations relating to acquired businesses, and
the impact on the final purchase price allocations; competitive pressure
among companies in our industry; and the fair values of our assets,
which can be impaired or reduced by other factors, some of which are
discussed above.

For a discussion of these and other risks and uncertainties that could
impair our results of operations or financial condition, see ‘‘Part I —
Item 1A — Risk Factors’’ and Note 19 to our audited consolidated
financial statements, included in our Annual Report on Form 10-K for the
year ended December 31, 2011, as modified by the Form 8-K filed on
November 20, 2012, “Part I – Item 2 – Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Overview and
Outlook – Industry Considerations,” included in our Quarterly Reports on
Form 10-Q for the quarters ended September 28, 2012, June 29, 2012 and
March 30, 2012, and any material updates to these factors contained in
any of our future filings.

Our forward-looking statements are not guarantees of future performance
and the actual results or developments may differ materially from the
expectations expressed in the forward-looking statements. As for the
forward-looking statements that relate to future financial results and
other projections, actual results will be different due to the inherent
uncertainties of estimates, forecasts and projections and may be better
or worse than projected and such differences could be material. Given
these uncertainties, you should not place any reliance on these
forward-looking statements. These forward-looking statements also
represent our estimates and assumptions only as of the date that they
were made. We expressly disclaim a duty to provide updates to these
forward-looking statements, and the estimates and assumptions associated
with them, after the date of this release to reflect events or changes
in circumstances or changes in expectations or the occurrence of
anticipated events.

– Financial Tables Follow –

Table A

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

Fourth Quarter Ended

Year Ended Dec. 31,

2012

2011

2012

2011

Net sales

$

3,560

$

3,543

$

13,146

$

13,158

Cost of sales

3,196

3,146

11,795

11,716

Impairment charge(a)

―

43

―

43

Operating income

364

354

1,351

1,399

Interest expense

46

52

184

204

Interest and other income, net

2

(10

)

8

—

Debt retirement charge

5

17

13

35

Income from continuing operations before income taxes

315

275

1,162

1,160

Provision for income taxes

100

21

374

296

Income from continuing operations

$

215

$

254

$

788

$

864

Income from discontinued operations, net of income tax

―

23

32

104

Net income

215

277

820

968

Less: Net income from continuing operations attributable to
noncontrolling interests

3

3

6

9

Less: Net income from discontinued operations attributable to
noncontrolling interests

—

—

4

3

Net income attributable to L-3

$

212

$

274

$

810

$

956

Less: Net income allocable to participating securities

―

―

―

2

Net income allocable to L-3 Holdings’ common shareholders

$

212

$

274

$

810

$

954

Basic earnings per share allocable to L-3 Holdings’ common
shareholders:

Continuing operations

$

2.28

$

2.52

$

8.12

$

8.17

Discontinued operations

$

―

$

0.23

$

0.29

$

0.97

Basic earnings per share

$

2.28

$

2.75

$

8.41

$

9.14

Diluted earnings per share allocable to L-3 Holdings’ common
shareholders:

Continuing operations

$

2.25

$

2.49

$

8.01

$

8.08

Discontinued operations

$

―

$

0.23

$

0.29

$

0.95

Diluted earnings per share

$

2.25

$

2.72

$

8.30

$

9.03

L-3 Holdings’ weighted average common shares outstanding:

Basic

93.0

99.7

96.3

104.4

Diluted

94.3

100.9

97.6

105.6

____________________________

(a)

Represents a fourth quarter 2011 non-cash goodwill impairment
charge due to a decline in the estimated fair value of our Marine
Services business.

Table B

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED SELECT FINANCIAL DATA

(in millions)

Fourth Quarter Ended

Year Ended Dec. 31,

2012

2011

2012

2011

Segment Operating Data

Net Sales:

Electronic Systems

$

1,616.7

$

1,555.1

$

5,676.8

$

5,627.9

C3ISR

967.1

1,013.2

3,601.2

3,479.9

AM&M

628.8

614.1

2,483.3

2,439.5

NSS

347.5

360.2

1,385.0

1,610.3

Total

$

3,560.1

$

3,542.6

$

13,146.3

$

13,157.6

Operating income:

Electronic Systems

$

192.1

$

215.1

$

672.5

$

718.9

C3ISR

91.9

109.7

363.7

394.4

AM&M

57.4

47.6

236.2

228.1

NSS

22.9

24.5

79.0

100.4

Total

$

364.3

$

396.9

$

1,351.4

$

1,441.8

Operating margin:

Electronic Systems

11.9

%

13.8

%

11.8

%

12.8

%

C3ISR

9.5

%

10.8

%

10.1

%

11.3

%

AM&M

9.1

%

7.8

%

9.5

%

9.4

%

NSS

6.6

%

6.8

%

5.7

%

6.2

%

Total

10.2

%

11.2

%

10.3

%

11.0

%

Depreciation and amortization:

Electronic Systems

$

41.3

$

38.8

$

146.7

$

148.3

C3ISR

12.2

11.5

46.6

44.1

AM&M

5.5

5.5

20.4

18.9

NSS

3.4

6.2

13.9

18.8

Total

$

62.4

$

62.0

$

227.6

$

230.1

Funded order data:

Electronic Systems

$

1,370

$

1,111

$

5,745

$

5,326

C3ISR

1,094

994

3,706

3,779

AM&M

614

500

2,916

2,296

NSS

268

249

1,431

1,490

Total

$

3,346

$

2,854

$

13,798

$

12,891

Dec. 31,

Dec. 31,

2012

2011

Period end data:

Funded backlog

$

10,884

$

9,899

Table C

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED

BALANCE SHEETS

(in millions)

Dec. 31,2012

Dec. 31,2011

ASSETS

Cash and cash equivalents

$

349

$

764

Billed receivables, net

968

1,093

Contracts in process

2,665

2,384

Inventories

363

317

Deferred income taxes

131

132

Other current assets

117

177

Assets of discontinued operations

―

1,729

Total current assets

4,593

6,596

Property, plant and equipment, net

1,017

921

Goodwill

7,760

7,472

Identifiable intangible assets

314

308

Deferred debt issue costs

29

33

Other assets

150

176

Total assets

$

13,863

$

15,506

LIABILITIES AND EQUITY

Accounts payable, trade

$

494

$

395

Accrued employment costs

556

563

Accrued expenses

439

517

Advance payments and billings in excess of costs incurred

708

567

Income taxes

5

40

Other current liabilities

398

379

Liabilities of discontinued operations

―

351

Total current liabilities

2,600

2,812

Pension and postretirement benefits

1,363

1,137

Deferred income taxes

355

335

Other liabilities

369

373

Long-term debt

3,629

4,125

Total liabilities

8,316

8,782

Shareholders’ equity

5,471

6,635

Noncontrolling interests of continuing operations

76

79

Noncontrolling interests of discontinued operations

―

10

Total equity

5,547

6,724

Total liabilities and equity

$

13,863

$

15,506

Table D

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in millions)

Year Ended Dec. 31,

2012

2011

Operating activities

Net income

$

820

$

968

Less: Income from discontinued operations, net of tax

32

104

Income from continuing operations

788

864

Depreciation of property, plant and equipment

170

167

Amortization of intangibles and other assets

58

63

Deferred income tax provision

82

124

Stock-based employee compensation expense

59

57

Contributions to employee savings plans in L-3 Holdings’ common
stock

125

113

Amortization of pension and postretirement benefit plans net loss
and prior service cost